Gold Price Lags Oil So Far as 'Epic Fury' Unleashes Middle East War

GOLD PRICES surged near end-January's record peak on Monday as crude oil and LNG both leapt and global stocks fell amid the fast-escalating Middle East war following the weekend's joint US-Israeli strikes on Iran, writes Atsuko Whitehouse at BullionVault.

Retaliating to 'Operation Epic Fury' with drone and missile strikes on Israel as well as against 27 airbases housing US military in neighboring nations including Kuwait, the UAE and Oman, the theocratic dictatorship of Iran also hit the giant Ras Tanura refinery in Saudi Arabia.

That prompted Saudi Aramco to halt operations at the plant, while world No.3 liquefied natural gas exporter Qatar suspended LNG production as the civilian and military death toll rose.

Fresh from recording the first-ever full week of $5000 gold prices before the war began on Saturday, gold in London jumped as much as 2.7% to $5418 per ounce, peaking 3.1% below the all-time spot price high set on 19 January before halving this morning's rise to trade at $5325.

US Energy Information Administration data show US domestic crude oil prices rising by more than 90% during the 1973 to 1974 Arab oil crisis, while gold prices rose nearly 140%.

During the Iranian Revolution from 1979 to 1980, crude oil surged over 110% while gold climbed nearly 150%, making its biggest 2-year percentage gain on record.

Today's surge in oil prices came despite the OPEC+ group of producer nations agreeing over the weekend to increase crude oil production significantly from April as the US-Israeli action killed Iran's leader, Ayatollah Ali Khamenei, and the Trump White House vowed to prosecute its war until Iran's nuclear weapon ambitions are destroyed.

Founding Opec member Iran said Saturday that it had closed the Strait of Hormuz − the world's most vital oil export route, through which 20% of the world's oil consumption passes − only to reverse that announcement on Sunday even as its military attacked 3 oil tankers passing its shores.

Traffic through Hormuz has evaporated after insurers told ship owners that will hike coverage prices for vessels in the Gulf region.

"This [price jump] is about Hormuz risk, not retaliation," said an analyst to Bloomberg.

"If shipping stays open, stocks can work through it. If it doesn't, all bets are off."

Natural gas prices in Europe today jumped as much as 46.6% on Dutch TTF April futures, while crude oil prices jumped 9.3% to top 8-month highs above $80 per barrel of global benchmark Brent, the biggest daily gain since March 2022 saw energy costs leap during the post-Covid supply crisis.

Base metals copper and nickel were little changed but silver prices rose as much as 2.8% to $96.40 per Troy ounce before reversing all those gains as US equities joined global stock markets in falling sharply.

The Dollar index – a measure of the US currency's value versus its major peers – rose 0.7% to a five-week high, while ten-year US Treasury yields – a benchmark rate for government as well as many finance and commercial borrowing costs – also rose 0.4% from a 4-month low as higher energy prices would make the Federal Reserve less inclined to cut interest rates.

Gold priced in UK Pounds surged as much as 3.8% to a fresh all-time high at £3829 per ounce, while the Euro gold price rose 3.6% towards its peak above €4628.